Can Lending Money Ruin a Relationship?

Lending money is always a delicate subject in a relationship, especially if the amount is significant. However, this isn't the only variable that has an influence.

Written and verified by the psychologist Valeria Sabater.

Last update: 21 December, 2022

You’ve probably found yourself lending small amounts of money at some time or another to your friends, colleagues, or family. They’ve probably also done the same for you. You (or they) may even have insisted there was no need to return it. However, things tend to change when there’s a lot of money involved.

Mark Twain stated that money is the root of all evil. Indeed, beyond being the means that allows us to survive, it can also be the source of grudges, conflict, and disappointments. Experts in the field of finance are clear: as far as possible, it’s advisable not to lend money to anyone. The risk of not recovering it is high.

However, from the field of psychology, rather than economics, the focus is on the personal. Nevertheless, here too, there are dangers that need to be considered. One of them, the most important, is the discomfort that’s created by the loan itself. In fact, tension, mistrust, and resentment might appear.

Therefore, it’s necessary to take some basic aspects into account.

Lending money: considerations to bear in mind

Money doesn’t always bring happiness, but it helps us to have an easier life with fewer worries. In this respect, Nobel Prize winner Daniel Kahneman conducted a study in 2010. He claimed that money buys life satisfaction but not happiness.

So, money doesn’t offer us emotional well-being but it does prevent us from having to ask others for financial assistance. This is an important factor. Because, while it’s common to have monetary support from the family if things go wrong, this sometimes leads to friction. Indeed, a survey conducted by Bankrate, a financial services company, found that more than 46 percent of people who lent money to a friend or family member had a negative experience.

In fact, 37 percent didn’t repay the loan and 21 percent saw their relationship with the borrower deteriorate. As the character of Laertes in Shakespeare’s Hamlet explained, in this life, it’s best to avoid being a borrower or a lender as the results are almost never positive. Let’s find out why.

Lending money: a recipe for resentment

Firstly, we must say that a loan doesn’t necessarily have to be detrimental to a relationship between two people.

For example, many parents ‘lend’ money to their children without expecting them to pay it back. However, it’s less common for a loan from another family member, friend, or colleague to work in the same way. 

In these circumstances, one party knows that they’re in debt, and the other awaits repayment. From that moment on, their relationship changes and often ceases to be so spontaneous, sincere, and relaxed. Furthermore, if the return of the money is delayed, feelings of resentment or mistrust can slowly begin to creep into the relationship.

Talking about money might become taboo precisely because of the loan. The borrower may also even stop sharing other daily conversations with the lender for fear of criticism. For instance, thoughts like “Wow, you owe me money yet you still manage to go out to dinner” can end up muddying communication between them.

In fact, when the lender witnesses the debtor continuing to make a living ‘beyond their means’ and is unwilling to make any kind of sacrifice, then resentment can really build up. That’s when the relationship breaks down and disappointment sets in. This phenomenon can be especially problematic within a family.

Many debts aren’t repaid

If you have a close relationship with someone who’s asked you for a loan and the amount isn’t too much for you, you might consider it as paid without the need for them to actually return it. On the other hand, if it’s a large amount, you’ll usually expect repayment.

Lending money to a partner can also be problematic. As a matter of fact, many partners have lost large sums of money due to financial abuse. It happens when one of them exercises power over the other through blackmail, manipulation, and threats, and ends up stealing large amounts of money from them.

Points to consider if you’re going to lend money to someone

Lending money can put you in an uncomfortable situation. That said, if the loan is to someone close to you, who you trust and you understand their situation, you might want to agree.

Obviously, each case is unique, but it’s always advisable to follow the guidelines indicated by experts, both in the financial and psychological fields. These are the keys you should take into account:

• Always remember that lending money can change a relationship. If the sum is high, assess the possible consequences.
• Make sure you analyze your own financial situation. If you’re not in a strong financial position, it’s better to avoid any risk and explain that you’re not in a position to lend any money.
• If you’re lending a large amount, make the conditions clear. When will you get it back? Will it be a single payment or made in several parts?
• Be prepared to witness behaviors that you may not like. For example, you might lend money to your brother or best friend so they can pay their rent, and later, see them having dinner at a restaurant with friends.
• Be aware that they may not return the money to you.

Finally, it’s always advisable to assume that any loan will end up being a gift. In fact, it’s the only way to avoid tension and the possibility of your relationship collapsing. So, if you really value your relationship, you should be prepared to forget the loan. As long as it’s a one-off, it’s better to prioritize affection over material things.